Former Liberal leader Lord Steel has denied “hiding his head in the sand” over child abuse allegations against former Rochdale MP Sir Cyril Smith.

Lord Steel said he asked the late politician in 1979 about claims he abused boys at a Rochdale hostel and found it dated back to Smith’s time as a Labour councillor in the 1960s.

He told the Independent Inquiry into Child Sexual Abuse (IICSA) he came away from the conversation with Smith “assuming” he had committed the offences because he did not deny them.

He said Smith had told him police had investigated the claims and taken no action.

The IICSA heard no formal inquiry was then held by the party into the claims.

On the suggestion no action was taken then because Lord Steel did not want to get involved in a nasty confrontation with Smith, he told the hearing: “I wouldn’t have been hiding my head in the sand.

“These allegations all related to a period some years before he was even an MP and before he was even a member of the party, therefore it did not seem to me that I had any position in the matter at all.”

Smith, who was an MP for Rochdale between 1972 and 1992, is accused of sexually abusing a number of boys.

Allegations against him found a greater public spotlight after he died in 2010.

Lord Steel’s conversation with Smith was prompted by a story in Private Eye.

It came after the Rochdale Alternative Press published a story in 1979 saying police had investigated Smith over allegations of abuse against teenagers at the Cambridge House hostel in the town.

Lord Steel told the inquiry: “He accepted the story was correct. Obviously I disapproved but as far as I was concerned it was past history.”

Inquiry counsel Brian Altman QC asked: “What gave you confidence Lord Steel that if Cyril Smith was confessing to you in 1979 that 10 years or more before that he assaulted children that he wasn’t continuing to do it on your watch?”

Lord Steel said: “He was no longer involved within the children’s home and indeed it had closed down.”

Mr Altman said: “In a sense he is confessing to you he has committed these acts which have been alleged against him.

“I am seeking to understand from you why that was the end of the matter with you being Liberal party leader (yet you) did nothing about it?”

Lord Steel replied: “He was not an MP at the time. He wasn’t even a member of the party.

“I did not feel I had any locus in it all other than being a reader of the paper.”

Mr Altman suggested: “He could for all you knew still be offending against children.”

Lord Steel said: “I have to admit that never occurred to me and I am not sure it would occur to me even today.”

The party did hold an inquiry into allegations against Jeremy Thorpe but Lord Steel said “that was different because it was current”.

He denied the suggestion any inaction around Smith was because it could not afford further negativity after the Thorpe scandal, saying “the party was unaware of all this and I could easily have been unaware of it if I had not been a subscriber of Private Eye”.

On recommending Smith for a knighthood, Lord Steel said: “If I had any suspicion that these activities had been continuing or he had been involved in it as an MP I certainly would not have recommended him for a knighthood – that would have been my natural instinct.”

In a June 2018 appearance on BBC’s Newsnight programme, he seemed to describe child sex abuse allegations against Smith as “tittle-tattle” and “scurrilous hearsay”.

Lord Steel told the hearing he thought he was not talking about the conversation he had with Smith but was referring to claims made in a book by former Rochdale MP Simon Danczuk.

He recalled speaking to Mr Danczuk after the book was published and said: “I told him what I thought a lot of it was very doubtful.”

Lord Steel ended his testimony with a personal thought, saying: “I must say I am a bit concerned about the unqualified way in which you cannot libel the dead.

“The dead have got relatives and friends, and I think it is rather scandalous the way some of the things have been said about people who are not around to answer.

“It’s a very important inquiry and I wish you well.”

After the hearing, one of Smith’s alleged Cambridge House victims, who has given evidence to the inquiry, criticised the party and Lord Steel.

The man, now in his 70s, said in a statement: “Smith was a monster. He needed treatment but they used him to promote their party and they let us down.

“They came first, not the victims. We were just cannon fodder.”

Richard Scorer, a specialist abuse lawyer who represents several of Smith’s victims, suggested after the hearing that “political self-interest was paramount and seemingly far more important that any concerns over the welfare of vulnerable children”.

Earlier, Liberal Democrat president Baroness Brinton said that by 1991 quick action would have been taken against any party member who was charged with serious offences, including them being suspended and expelled as soon as the court case concluded.

She told the hearing that now “if we need to go to the police, we will go sooner rather than later” and officials may also contact social services.

A pastoral care officer role that was created in 2013 to support complainants and staff with a grievance, disciplinary issue or a serious incident was “in part” a response to the Cyril Smith allegations, she added.